Investigation Into Online Discount Practices Includes Barnes & Noble

By Judith Rosen
|

Jan 28, 2010

In a conference call Wednesday morning, New York Attorney General Andrew Cuomo announced that his office has sent subpoenas to 22 online retailers as part of an investigation into deceptively linking consumers to membership programs that charge unauthorized fees under the guise of discount offers. Among those subpoenaed was Barnes & Noble.

B&N acknowledged it had received a subpoena from the Attorney General, but said it is not one of the retailers who turns over personal or credit or debit card information to discount clubs. "We welcome the Attorney General's review because it will show that Barnes & Noble does not, nor has it ever, shared customer debit or credit card information with discount clubs," said William Lynch, president of Barnes & Noble.com.

The Attorney General’s office is investigating a practice that begins when consumers complete a transaction at a familiar retailer’s online site, and are offered an opportunity to find out if they’re eligible for discount coupons. But when they click, they are redirected to a membership service’s Web site that signs up the consumer for monthly membership by taking the credit card information from the previous purchase. Because the recurring charges are small, Cuomo said that many people have paid the charge for months if not years. Cuomo called it “a classic consumer fraud” that nets an estimated $1 billion a year.

The subpoenas seek information on retailers’ practices of sharing consumers’ account information, knowledge of deceptive solicitation, and compensation from membership companies Webloyalty, Affinion/Trilegiant, and Vertrue. In addition to B&N, other companies being investigated includes Orbitz.com, Buy.com, and MovieTickets.com. Cuomo praised movie ticket retailer Fandango, which has agreed to stop sharing consumers’ financial information with discount clubs. “I expect the other businesses to follow Fandango’s lead and adopt these reforms to protect consumers who shop online,” he said.

B&N confirmed that it has a relationship with Webloyalty since 2005, but said that it has never provided Webloyalty with any customer credit and debit card information. According to B&N, when a customer completes a transaction on Barnes & Noble.com (www.bn.com), they are presented with a Webloyalty ad offering a discount. The customer has to click through the ad, at which time the customer is informed they are leaving Barnes & Noble.com and will be subject to Webloyalty's terms and conditions. Once on Webloyalty's Web site, the customer would have to register and provide their personal information to Webloyalty.

"Customers should be reassured that their personal information, including credit and debit card information is not and never has been shared with discount clubs," Lynch said in a statement.

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